The Emissions Trading Scheme hits the backburner

There is some good commentary about the Emissions Trading Scheme going on hold at Pundit:

Have we wasted the whole last decade debating climate change policy, if we need to go back and start from scratch with a select committee review of ETS? No party was happy with the scheme that was finally passed in September. It took years of negotiation and huge political compromise from those who voted for it. Now National will consider “any amendments or alternatives to it, including carbon taxes”. Are we just starting again then? Given that US president-elect Barack Obama is committed to a cap and trade scheme and even the United Nations is working on plans for a “Green New Deal”, why on earth are we choosing to give up our competitive advantage (ie years of policy work)?

To avoid further damage to our international credibility, National should immediately issue revised terms of reference and a tight timetable for their “special” select committee: taking out all references to considering the science of climate change and the possibility of a carbon tax, and explicitly limit the committee to considering amendments to the ETS framework. To do less (or nothing) will do further damage to business in NZ and our international reputation.

Time for the NZ scientific community to make it clear to Nick Smith and National that the starting point for any review of climate policy has to be an acceptance of the IPCC’s Fourth Report, and the NZ Royal Society’s statement issued earlier this year. Anything else would be like appointing Ken Ring to run MetService.

And Audrey Young at the Herald:

Act’s position has changed markedly over the years. When Labour proposed a carbon tax, Act opposed it and National wanted an emissions trading scheme.

When Labour proposed an emissions trading scheme, Act supported a carbon tax. It has now won a review that will include looking again at a carbon tax.

During the short space of the campaign Act has argued that climate change is not happening and it is a hoax, that it is happening but it is a good thing, and that it is happening but we should not do anything because we are too small to matter. Now it seems, because Rodney Hide can’t make up his mind about climate change, the rest of us are to be subjected to further delay. And all just at the time when the rest of the world is arguing we must act now if we are to take our best opportunity to avert a crisis (and embrace an opportunity).

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34 thoughts on “The Emissions Trading Scheme hits the backburner”

What the Alliance was made up of is not relevant to my point beyond that it was a party of the left and was anti war. When the govt decided to support the US in Afghanistan, it split because it was too big a compromise of its principles for it to withstand.

The Green Party consists of people of all hues, though mostly from the left, esspecially the dregs from the alliance and new labour. By stating before the election that the party would work with labour and not with national the party was able to syphon some vote off labour to increase its vote in proportion to its potential coalition partner, though at the same time that action alienated the green members and voters whom were more to the right and over all left the left with fewer votes than it otherwise would of had; ifthe election had been slightly tighter, that decision could of quite possibly been the choice that made it.

BJ,
you dont know the alliance? what split it is open to opinion, I supose most would say subtle ideological differences but also; the greens left it first and alot of the alliance members whom stayed blamed the greens for the break up, those that didint latter joined the greens and are part of the fundi lefties that so rot this party. but then again i was alittle over a decade old at the time 😛

Fair enough. There are two reasons. One is that there are people who vote Green who will not risk their vote if there is any possibility that the result could be supporting National. Some in the party are deathly afraid that those votes would be lost. This is not a false issue, as much of the Green vote is soft Labour. The other reason is that many party members fear just as much the party being compromised in one of its core principles, leading to a schism like the Alliance suffered. This is the standard fundis vs realos argument that most Green parties have to deal with. The fundis have so far won the debate.

I judge from appearances same as most people. The party did not inform me about its reasoning with respect to why it elected to shoot first and ask questions later, nor would it have been appropriate for the party to bother doing that. I disagree with the reasoning so far presented. After you hear the offer is time enough to spit-the-dummy. No need to jump the gun.

It’s also worth noting that businesses that factor the cost of carbon into their operations will be better placed to trade in markets where carbon pricing is in effect, even if they are not themselves subject to a carbon price and there are no “leakage” charges at the border. An example would be the introduction of carbon labelling in the UK. At present, it’s voluntary, but there are moves to make it mandatory. NZ products will need carbon labels, and will therefore need to work out the carbon “content” of their products before export. It’s a bit like our abattoirs having to meet EU standards… It’s an external discipline.

Delaying putting a cost of carbon into the NZ market helps no-one except big emitters and the ideologically deluded.

Interesting link JH.. and I think that I have to accept this view. The ETS does affect Carbon – eventually – (I think…. it will depend on how it winds up being gamed), but it does not do so as efficiently as other measures until the credits themselves become really quite expensive.

The only value for NZ of any scheme is whether it mitigates trade barriers imposed by some of our trading partners (Europe).

Any such scheme alters the market. I would argue that there are other benefits in the long run depending on the effects of that market alteration on the development and use of alternative energy and the conservation of energy that it might encourage. In the LONG run, those benefits will be at least as large as any trade related advantage/disadvantage we might enjoy/suffer. Economists do not generally concern themselves with timespans of centuries and that’s not a criticism. Most problems in economics are resolved in much more tractable time periods.

Which is not to leave the consideration of the potential trade-barriers out.

The only emissions trading schemes that have worked (and the same applies to trading in water rights) are those that operate within a single jurisdiction.
So California’s air pollution trading systems worked.
Australia’s water rights trading works in the Murray basin but they do have troubles with the interstate transfers.
How do we enforce breaches and fraud between nations. Who sets up the courts and what jurisdictions apply. How reliable are the statistics in Africa and Russia?
What currency conversion is appropriate. market rates or PPP?

Owen… the problem is that the temperature doesn’t really go up until 30 years after the carbon is released… I would happily buy into such an idea if we could realistically manage the measurement-of-the-future problem.

Of course if we COULD do that, there wouldn’t be any more arguments today. Everyone would be doing everything we greens have ever hinted might be a good idea to reduce our carbon footprint and they’d be inventing new things to do in the bargain.

“We stay with Kyoto as it MIGHT control climate change, or we ditch Kyoto and FEAR the wrath of trading nations that believe in the concept.”

Actually the blog post is saying that the purpose of this policy should be to pay off our liability in the least cost way – given that New Zealand is too small to prevent a global warming event.

As a result we can stay in the scheme – in which case the ETS is the cheapest cost way of paying off the liability, or we could leave the scheme. The government has determined that saying in the scheme is the least cost of these two options and so the ETS makes sense.

If we were a big enough country to influence the probability of a global warming event, then the truth of global warming would be a relevant issue. However, for NZ, even if global warming was not real an ETS is still a good idea – given the costings of the alternatives provided by government and independent analysts.

Actually as an economist I favour pricing of negative externalities and property rights to address issues of failure of the commons. So an ETS would be the better international approach to issues of environmental pollution.

Tradeable rights are the best way to determine the value of a right to emit and provide the revenue to mitigate.
However thus requires having equivalent rules across all countries, and for all polluters to be included in the regime – otherwise the scheme can be gamed by someone either opting out, or utilising a variation in the rules between countries for arbitrage (just look at the tax industry as an example of rule gaming). End result in government failure and worse outcome for people and the environment (lower standard of living and more pollution).

A carbon tax is an alternative approach for dealing with a localised problem where you are seeking to provide incentives to change behaviour or recover the cost of mitigation (e.g. taxes on tobacco). This maybe a preferable alternative when you are unable to create enforceable contracts across borders. The policy problem is whether taking action on your own without the effecting the major cause of the problem are you just simply cutting your nose off to spite your face.

Without China, India, Russia, USA etc joining an ETS it is nearly meaningless as a tool to address pollution.

The only value for NZ of any scheme is whether it mitigates trade barriers imposed by some of our trading partners (Europe). The question then is whether it is more efficient for this cost to be borne by the whole economy or just on those that export to europe. So do we want to create a subsidy for one group paid for by everyone else in NZ? The only reason for doing so is when the benefits to society outweigh the costs imposed on socirty – so do we end up with an overall better economy.

JH – so far all bets that I have seen on climate change and peak oil have resulted in efficient transfers from environmentalists to economists.

The Greens originally favoured the carbon tax and were quite right to do so in that if you are determined to reduce the use of fossil fuels then a carbon tax is more equitable and less prone to fraud that emissions trading (which after all was invented by Enron.) Every economist I know favours the carbon tax over an ETS.
A carbon tax is even more efficient if you tie it to global tropospheric temperature so that if the temp goes up the tax goes up and if it goes down the tax goes down.
It looked complex so we switched to the ETS. I believe that had we started with the ETS we would have switched to carbon tax after a few weeks of unravelling the mess.
A tax must be easy to calculate. So a tax on fossil fuel consumption can be done with your GST.
But please tell me the carbon dioxide emission equation for converting forest to pasture? NOt only can no one agree on the equation but in NZ and elsewhere there is not even consensus as to whether the outcome is positive or negative.
What sort of taxation regime is that?

Valis – The public is looking at the election negotiations, not Key’s actions however many months ago. Doubtful that they’d remember events as accurately as you do. I am fully aware that there is an EXCELLENT chance that negotiations would have been fruitless, but the refusal ahead of the election LOOKS bad. It looks to many people, as thought the Greens are too idealistic and wrapped up in themselves to talk.

It isn’t a good strategic decision if you’re trying to build credit up to where people have to take you seriously. Right now nobody outside this little circle takes the party very seriously.

bj, that is unfair. It not like the Nats haven’t had other chances. When Key pulled their support for the ETS bill, he said he wanted to “sit down with Jeanette” to discuss alternatives. Jeanette said yes immediately, and yet Key refused and would never even give the public an indication of what he’d like to do instead, apart from vague principles which in many cases had been addressed with the changes the Greens negotiated. Instead, he let Nick Smith mouth untruths purely for political gain with no regard for the importance of this issue. I appreciate that you wanted a more flexible position from the Greens after the election and have no problem with that. But that no talks have occurred on this topic is no fault of ours.

Actually Bera, what the Greens said was the equivalent of “nyah, nyah… I’m not listening” before hearing any offer whatsoever… or making any counteroffer… and then deciding based on knowledge of what WAS on offer what might possibly be appropriate. If the offer was as both of us expect it would be, short on substance with respect to green policies, we’d STILL know more about how National works and we’d have had an opportunity to explain explicitly what we objected to.

The refusal simply reinforces the public perception of Green extremism. Wouldn’t even TALK… it really doesn’t go down well anywhere I’ve ever been.

In the meantime – why not go north and enjoy a bumber ski season in the northern hemisphere (www.nzherald.co.nz/travel/news/article.cfm?c_id=7&objectid=10543680), which has early snow to go with recent unseasonal snow in the South Island. because we all know that a single hurricane is a sign of climate warming, just like a picture of a polar bear on an iceberg is a sign that polar bears are becoming extinct.